ASX 200 BNPL shares have had a stellar month but is growth the priority or fewer bad debts?

The Block Inc (ASX: SQ2) share price has surged 26% in the past month. Meanwhile, the Zip Co Ltd (ASX: ZIP) has exploded 146% in a month.

Let’s take a look at what is going on at Block.

How is block performing?

Block (ASX: SQ2) acquired Afterpay in February 2022. Block is also listed on the New York Stock Exchange (NYSE). In the second quarter of 2022, Block reported a 29% increase in gross profit to $1.47 billion.

Afterpay delivered US$5.3 billion of total transactions in the quarter. This was a 13% boost. However, as my Foolish colleague Brooke recently reported, fellow BNPL share Zip delivered a 20% transaction increase in the June quarter.

It appears lowering risk could be a focus for Block. Speaking at a conference call following financial results, Block financial officer Amrita Ahuja highlighted how the company’s consumer repayments are improving. She said:

We continue to see healthy consumer repayment behaviour with 95% of instalments paid on time.

Losses on consumer receivables were 1.02% of Gross Merchandise Value (GMV) during the second quarter, an improvement compared to 1.17% in the first quarter, driven by mix shift, as well as enhancements to our risk models and processes during the first half of the year.

Analysts at Credit Suisse have recently maintained an outperform rating on the block share price with a US$125 price target.

Block share price snapshot

The Block share price has fallen 31% in the past year, nearly 24% more than the S&P/ASX 200 Index (ASX: XJO) benchmark.

Block has a market capitalisation of nearly $4.6 billion based on the current share price.

The post Is this ASX 200 BNPL player focused on growth or less risk? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why Block, Lake, Mirvac, and QBE shares are racing higher
• Why are ASX 200 tech shares flying higher on Thursday?
• Why has the Block share price exploded 9% on the ASX today?
• Why Block, CBA, Mesoblast, and NAB shares are dropping today

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Bendigo and Adelaide Bank Ltd (ASX: BEN) shares are an interesting investment decision when it comes to dividends. It’s not just the big four ASX bank shares that pay large dividends to investors each year.

Many investors may already know about Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares.

But, did you know that the last 12 months of Bendigo Bank dividends amount to 53 cents per share? Translating that into a dividend yield, the trailing grossed-up yield is 7.1%. Not too shabby, right?

Dividend growth is expected

Banks are steadily recovering from the impact of COVID-19 on their financials.

Bendigo Bank is no different. Using the estimates on CMC Markets, the regional bank is expected to grow its profit and dividend per share in FY23.

The forecast for earnings per share (EPS) is 85.5 cents in FY23 and the annual dividend per share is expected to be 56.5 cents per share.

In FY24, the dividend is expected to grow again to 59.8 cents per share.

Now, that level of growth is certainly not shooting the lights out. However, a large starting yield with ongoing growth could be attractive.

The FY23 grossed-up dividend yield is therefore expected to be 7.5% and 8% in FY24.

However, there’s more to the investment question than just the dividends and their yield.

What do analysts think of the Bendigo Bank share price?

The Bendigo Bank share price has delivered outperformance in 2022 compared to the other banks.

In 2022, Bendigo Bank has risen by 15%. That compares to:

A 2.6% fall in the CBA share price in 2022.

The NAB share price has risen 4.6%.

The ANZ share price has fallen by 13.5%.

The Westpac share price went up 4.4%

After this period of outperformance, the broker Macquarie rates Bendigo Bank as underperform due to its valuation with a price target of $10. That implies a drop of the Bendigo Bank share price in the mid-single-digits over the next year. It isn’t sure if the regional bank will be successful with its lofty cost goals.

Credit Suisse is a bit more optimistic about the bank. It thinks that the rising Reserve Bank of Australia (RBA) interest rate will help Bendigo Bank’s net interest margin (NIM) over the next couple of financial years, though higher arrears and bad debts will somewhat impact the benefit of this.

My take on investing in Bendigo Bank shares for dividends

I think that Bendigo Bank is doing the right things to try to grow profit, including growing its loan book and hopefully improving its profit margins in the short-to-medium term.

The expected dividends seem compelling from Bendigo Bank. I’m not sure what the long-term profit growth outlook for the ASX bank share or the wider sector looks like. I suppose it partly depends on what happens with inflation and interest rates.

On income alone, Bendigo Bank could be a decent option. But, I do think there could be some other ASX dividend shares that are able to grow their profit and dividend more over the coming years.

The post Should investors buy Bendigo Bank shares for dividends? appeared first on The Motley Fool Australia.

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More reading

• Why Goldman Sachs says the Bendigo and Adelaide Bank share price is great value
• Is the Bendigo Bank share price a buy ahead of next month’s earnings?
• What might ANZ’s Suncorp deal mean for competition among ASX 200 banks?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Bendigo and Adelaide Bank Limited. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Pilbara Minerals Ltd (ASX: PLS) share price has been in fine form in recent weeks.

Since this time last month, the lithium miner’s shares have stormed 31% higher to $3.12.

Can the Pilbara Minerals share price keep rising?

The good news for investors is that the Pilbara Minerals share price rally may not be over just yet.

That’s the view of one leading broker that has just bumped its price target materially higher from previous levels.

According to a note out of Citi, its analysts have retained their buy rating but lifted their price target by 40% to $3.60.

Based on the current Pilbara Minerals share price, this implies potential upside of 15% for investors over the next 12 months.

What did the broker say?

While Citi has reduced its FY 2022 earnings estimate to reflect the company’s recent update, it has given its FY 2023 and FY 2024 estimates a major boost to reflect higher spodumene price assumptions.

The broker explained:

We update our model for the JunQ result and Citi’s higher spodumene deck. JunQ nos were pre-released –see: Cash flows in JunQ. Capex for expansion gets front-end loaded — with new info definitive cash costs of US$462/t CIF ex royalties. FY23 guidance to come with the financial result in August. Key interest at the result will be on capital management; PLS ended JunQ with A$874.2m including letters of credit.

Our EBITDA reduces by 9% in FY22e to A$840m after updating for the result. However, EBITDA lifts materially in FY23e and FY24e given higher spodumene prices. NAV lifts ~16% to A$2.70/sh and our TP lifts 40cps to A$3.60/sh. We stay Buy rated here with expectations of +15% FCF in FY23e.

The post Up 30% in a month, can the Pilbara Minerals share price keep rising? appeared first on The Motley Fool Australia.

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More reading

• Brokers name 3 ASX shares to buy today
• Up 52% since June, can the Pilbara Minerals share price extend gains?
• Why is the Lake Resources share price up so much more than other ASX lithium shares today?
• The Pilbara Minerals share price has powered 28% higher in a month. What’s been happening?
• Could this development further energise ASX lithium shares in FY23?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Earlier this week The Motley Fool reported on the ASX share portfolios that should ring alarm bells. 

This time let’s take a look at the opposite — portfolios that are ready to beat the market.

Of course, success is not confined to just these models. But the team at Marcus Today reckon these two styles have a great chance of beating the market:

Portfolio to invest for income

We already heard how useless it is to have a portfolio stuffed solely with large cap ASX shares.

Not only does such a batch have a poor chance of beating the market, it encourages laziness. The investor may not keep track of what’s happening with those businesses, armed with a false sense of security from the big names.

“It may seem normal and sensible, but the truth is that if you’re going to do this ‘moron portfolio’ thing, you’d be better saving yourself from a lot of admin, activity and lost evenings and weekends by just buying market ETFs,” read the Marcus Today blog post.

But converse to that is owning a “big 20” income portfolio.

“Unlike holding a portfolio of twenty big stocks just because they’re big, picking 20 stocks for yield is a sensible use of your time.”

Constructing such a stable requires some intelligent research to pick ASX shares that are high yielding but have relatively low volatility.

Not all income stocks are born the same, the Marcus Today analysts warned.

“Banks are income stocks. They are boring, safe, have high payout ratios and few ambitions. They understand the importance of their dividends to shareholders and will pay them come high water,” the blog read.

“Resources, on the other hand, are cyclical. They offer high yields in the good times but as we found out from Rio Tinto Limited (ASX: RIO) at the last results, not all the time.”

Portfolio to invest for growth

The other model the Marcus Today team favours is owning a portfolio of just five to ten ASX shares and looking after them really well.

“This is probably the most ‘fun’ and intellectual, yet least guesswork way to make money out of stocks,” read the blog.

“The trick is to keep the list short so you know the stocks. Five would be a good number.”

The idea here is that owning five companies that you really know well and closely follow is infinitely better than a portfolio of 20 businesses that you have little idea about.

The stocks are bought with a long-term horizon, then “maybe three or four times” a year the investor would review the portfolio to sell and buy other ones.

“You know them well, get to understand how they trade, what they do, when to buy them and when to sell them.”

This concentrated portfolio is the opposite of another “red flag” the Marcus Today team raised: stock picking anything and everything.

“Trading everything and anything — it involves tips and it invites a lot of volatility, risk and reward,” stated the blog.

“It is for people who don’t have a heart condition. This is riding the stormy seas.”

The post 2 types of stock portfolios primed to beat the market: experts appeared first on The Motley Fool Australia.

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More reading

• ‘Strongest tailwinds in a decade’: Morgans tips Telstra shares as a buy
• Up 12% in 30 days, is the Westpac share price still a buy?
• Can Coles shares deliver 13% growth AND tasty dividends this year?
• Experts name 2 ASX growth shares to buy when the market reopens
• Could this ASX 200 share be heading for a short squeeze?

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Telstra Corporation Ltd (ASX: TLS) share price could be great value after the telco’s full year results.

That’s the view of the team at Morgans, which have reiterated their bullish view on the company’s shares.

What is the broker saying about Telstra’s shares?

According to a note, the broker felt that Telstra delivered a “good result” in FY 2022. It said:

Delivering his last result, CEO Andrew Penn exits Telstra Corporation on a high note. The FY22 result came in at the upper end of guidance (underlying EBITDA +8% YoY), FCF was a beat and TLS raised its dividend (+0.5 cents) for the first time in years.

In light of this and its positive outlook, the broker has retained its add rating and lifted its price target to $4.60.

Based on the current Telstra share price of $4.00, this implies potential upside of 15% for investors over the next 12 months.

In addition, Morgans is now forecasting a 17 cents per share fully franked dividend in FY 2023. If we add this into the equation, this will mean a total return of almost 20% for investors.

‘Strongest tailwinds in a decade’

Morgans is bullish on the Telstra share price largely due to its belief that the company is experiencing its best trading conditions in a decade. It explained:

Telco has the strongest tailwinds in a decade with an increasingly rational market, pricing rises and the criticality of telco increasingly recognised. This combines with an incoming CEO who currently seems unlikely to drastically change the business and the potential for value uplift (potential bids) following the legal restructure. We retain our Add recommendation and our Target Price lifts to $4.60.

The post ‘Strongest tailwinds in a decade’: Morgans tips Telstra shares as a buy appeared first on The Motley Fool Australia.

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More reading

• Brokers name 3 ASX shares to buy today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Is the Telstra share price a buy after the telco’s FY22 results?
• Why AMP, OFX, Rio Tinto, and Telstra shares are dropping
• Equity markets threaten to ‘melt up’ as Nasdaq enters bull market territory

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Westpac Banking Corp (ASX: WBC) share price has had a great month on the market, lifting around 12% in that time.

And despite its recent green streak, many brokers are still predicting gains from the banking giant.

The Westpac share price closed 0.8% higher at $22.66 on Friday.

For context, the S&P/ASX 200 Index (ASX: XJO) finished down 0.54% today while the S&P/ASX 200 Financials Index (ASX: XFJ) slipped 0.22%.

So, what are brokers expecting from the third largest ASX 200 ‘big four’ bank? Let’s take a look.

Does the Westpac share price still offer a notable upside?

The Westpac share price has been on a roll lately, and it still has a decent upside if you ask Goldman Sachs.

The broker has tipped the Westpac share price to reach $26.12, slapping it with a ‘buy’ rating, my Fool colleague James reports. That represents a potential 15% upside on its current price.

The broker believes the company will benefit from rising interest rates and expects it to up its dividends over the coming years.

It’s tipped Westpac to pay shareholders $1.23 of fully franked dividends in financial year 2022 and $1.35 in financial year 2023.

For context, the bank paid out $1.18 per share in financial year 2021. It’s expected to announce its final dividend for financial year 2022 in November.

The team at Morgan Stanley has also recently been bullish on the bank, placing an ‘outperform’ rating on the stock earlier this month.

And while Westpac shares have since surpassed Morgan Stanley’s price target, investors will likely hope its dividend forecast will come true. The broker tipped $1.25 of dividends for financial year 2022 and $1.30 for financial year 2023.

Finally, Citi had a $29 price target and a ‘buy’ rating on Westpac shares last month, representing a potential 28% upside. On top of that, its dividend outlook was the most bullish by far.

It’s expecting the bank’s shareholders to receive $1.23 per share in financial year 2022 and a whopping $1.55 in financial year 2023.

The post Up 12% in 30 days, is the Westpac share price still a buy? appeared first on The Motley Fool Australia.

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More reading

• Top ASX dividend shares to buy in August 2022
• Own Westpac shares? Here’s when the ASX 200 bank will release its FY22 earnings
• Analysts say these ASX dividend shares are top buys
• Own Westpac shares? This broker expects the bank’s dividends to surge 10% by FY23  
• 2 ASX dividend shares that experts rate as buys

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Coles Group Ltd (ASX: COL) shares have been a pleasing investment to have held in recent months. Just take yesterday. The S&P/ASX 200 Index (ASX: XJO) closed 0.54% lower. But the Coles share price went the other way, adding 0.48% to $18.81 a share.

Sure, Coles has retreated from the all-time high of $19.28 a share that we saw at the start of this month. But the grocer still remains up 5% in 2022 so far, and around 3% over the past 12 months. In contrast, the ASX 200 is still nursing losses of around 7.5% for both of these periods.

But is there still gas in the tank for Coles shares after these periods of outperformance?

Well, if you ask one ASX broker, the answer is a decisive ‘yes’.

Coles shares picked as a buy by ASX experts

My Fool colleague James covered the opinions of ASX broker Citi earlier this week. Citi has recently retained its “buy” rating on the company and lifted its 12-month share price target to $21. if this came to pass, it would represent a potential upside of around 12% from where Coles is today.

Citi reckons Coles will enjoy boosted sales over FY 2023 thanks to the effects of rising inflation. This broker is also pencilling in a big lift in dividends to 75 cents per share for FY 2023, up from an expected 65 cents for FY 2022. Coles has already lifted its dividends substantially in recent years.

As my Fool colleague Brooke noted this week, Coles doled out 35.5 cents per share for FY 2019, 57.5 cents per share for FY 2020 and 61 cents for FY 2021.

If the supermarket operator indeed lifts its dividends to 75 cents per share for FY 2023, it would represent a forward yield of just over 4% (or 5.72% grossed-up with Coles’ typical full franking credits) at today’s pricing.

But Citi isn’t the only expert investor eyeing off the grocer right now. As we also covered this week, Dr Philipp Hofflin from Lazard Asset Management picked Coles as an ASX share that could be held in a difficult economic environment. This was due to the company’s lack of debt and “strong” balance sheet.

So it seems that more than one ASX expert is bullish on Coles’ future today. No doubt investors will welcome that news.

At the current Coles share price, this ASX 200 blue chip share has a market capitalisation of $25.05 billion, with a trailing dividend yield of 3.25%

The post Can Coles shares deliver 13% growth AND tasty dividends this year? appeared first on The Motley Fool Australia.

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More reading

• Could this ASX 200 share be heading for a short squeeze?
• Here are the top 10 ASX 200 shares today
• The A2 Milk share price has had a tough week. Could this other ASX dairy company cash in?
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Is this why the NIB share price is lagging Medibank on Friday?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Australian share market is home to a number of high quality ASX growth shares.

Two that could be worth considering are listed below. Here’s what you need to know about them:

IDP Education Ltd (ASX: IEL)

The first ASX growth share that has been tipped as a buy is IDP Education. It is a leading provider of international student placement services and English language testing services.

Goldman Sachs is very positive on IDP Education’s outlook thanks to the recovery in the student placement market and structural growth drivers. The broker explained:

We see a compelling long-term growth opportunity with a number of drivers: Structural growth in multi-destination student placement markets; supplemented by ongoing recovery in the Australian market; Ability to grow market share in highly fragmented Canadian and UK SP markets; Reinvestment in digital capabilities to increase competitive advantage and strengthen relationships with tertiary institutions and; Consolidation of IELTs business and ability to supplement organic growth with bolt-on acquisitions.

Goldman has a buy rating and $35.50 price target on its shares. This compares favourably to the current IDP Education share price of $27.69.

Treasury Wine Estates Ltd (ASX: TWE)

Another ASX growth share that has been tipped as a buy is wine giant Treasury Wine.

Morgans is a big fan of the company and believes it is well-positioned for strong growth in the coming years. This is due to its world class portfolio of brands, its recent restructure, and its highly regarded management team. The broker also sees a lot of value in its shares at the current level.

Morgans explained:

TWE owns much loved iconic wine brands, the jewel in the crown being Penfolds. We rate its management team highly. The foundations are now in place for TWE to deliver strong earnings growth from the 2H22 over the next few years. Trading at a material discount to our valuation and other luxury brand owners, TWE is a key pick for us.

Its analysts currently have an add rating and $13.93 price target on the company’s shares. This compares to the latest Treasury Wine share price of $12.37.

The post Experts name 2 ASX growth shares to buy when the market reopens appeared first on The Motley Fool Australia.

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More reading

• ‘Back to a growth mindset’: Expert names ASX share ready to take off
• Treasury Wine share price up amid key China trademark win
• 2 excellent ASX growth shares to buy now according to brokers
• 3 ASX 200 shares to buy for a post-COVID resurgence: experts
• Winner winner chicken dinner: Expert names 2 ASX shares to buy now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Idp Education Pty Ltd. The Motley Fool Australia has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The term ‘short squeeze‘ might cause different reactions for different investors. Perhaps especially so when it comes to the JB Hi-Fi Ltd (ASX: JBH) share price.

JB Hi-Fi has been one of the best-performing ASX 200 retail shares in recent years. In fact, JB Hi-Fi shareholders have enjoyed a roughly 400% return over the past 10 years from share price appreciation alone.

Throw in the company’s lucrative dividends and we probably have more than a few happy shareholders. But JB Hi-Fi has also been struggling more recently.

We saw the retailer hit a new all-time high of $56.85 a share back in March. But by mid-June, the company had hit a new 52-week low of $36.69. That’s a three-month slide of more than 33%.

Since June, the JB Hi-Fi share price has recovered substantially. It closed at $45.55 on Friday, up more than 30% from those June lows.

But let’s get to the ‘short squeeze’ part.

Why would JB Hi-Fi shares get short squeezed?

So according to reporting in The Australian today, short-seller interest in JB Hi-Fi shares has risen to 5.11% of the issued capital.

This prompted James Nicolaou, senior advisor at Shaw & Partners, to declare: “If recent history means anything, a big short squeeze [is likely and JB] stock is going higher… JBH has rallied higher every reporting day now for seven straight results”.

JB Hi-Fi is indeed scheduled to report its full-year results for FY2022 next Monday (15 August). Nicolaou is arguing that JB Hi-Fi shares consistently rise after company results are released, so the shares will be subject to a short squeeze because of the higher interest from short sellers.

Short selling a share refers to the practice of borrowing shares from another investor and selling them immediately, with the promise to buy them back and return them at a later date. If the sold shares fall in value between when they are sold and bought back, the shorter makes a profit.

A short squeeze can occur when a company’s share price rises. This rising price increases the risk of a short seller losing money on their short position. If the rise is substantial, it can force the short sellers to buy back the shares early and ‘cover’ their position to ensure they don’t lose even more money. This buying pressure can send the shares up even higher, creating the ‘squeeze’.

This is what Nicolaou is arguing could happen with JB Hi-Fi shares next week. But we’ll have to wait and see if this scenario plays out.

In the meantime, the last JB Hi-Fi share price of $45.55 gives this ASX 200 retailer a market capitalisation of $5.03 billion, with a dividend yield of 5.93%.

The post Could this ASX 200 share be heading for a short squeeze? appeared first on The Motley Fool Australia.

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• The A2 Milk share price has had a tough week. Could this other ASX dairy company cash in?
• Here are the 3 most heavily traded ASX 200 shares on Friday
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• Down 20% since March, is this ASX 200 share a misunderstood investment opportunity?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Reporting season has arrived, and finally the market focus is on company performance rather than external factors beyond our control, like inflation and wars.

So, halfway through the month, which are the ASX shares that look attractive after their latest financials?

Morgans analysts had a couple of ideas:

The business that wins every time interest rates rise

Computershare Limited (ASX: CPU) already had an ‘add’ rating at Morgans, but the team has further lifted its future expectations after this week’s results.

“Computershare’s FY22 management EPS [earnings per share] was +10.6% on the pcp [prior corresponding period] and came in slightly above full-year guidance,” senior analyst Richard Coles said on the Morgans blog.

“With FY23 guidance for +55% EPS growth, interest rate leverage appears to trump other concerns near term, in our view.”

The ASX share is one of those unusual businesses that benefit from rising interest rates.

This is because it holds funds yet to be paid out to investors, such as dividends. Computershare invests that pool, with the returns going straight to its bottom line.

Morgans has upgraded Computershare’s 2023 and 2024 earnings forecasts by 9% to 13% to reflect “higher margin income assumptions going forward”.

“Computershare is a quality franchise that has delivered solid returns and consistent growth over time,” said Coles.

“The company remains well positioned to benefit from rising global interest rates, and initial signs from the Wells Fargo Corporate Trust acquisition remain positive.”

The Computershare stock price has gained 14.7% year-to-date.

‘One of the highest quality franchises’

Real estate classifieds provider REA Group Limited (ASX: REA) has also retained an ‘add’ recommendation at Morgans, even though earnings forecasts were lowered slightly.

“REA remains one of the highest quality franchises in our coverage,” said associate analyst Steven Sassine on the Morgans blog.

“And whilst FY23 may exhibit some volatility (e.g. macro impacts on listings volumes), we believe management has levers to potentially pull (e.g. yield) in such an environment.”

The financial result this week showed it was slightly ahead of consensus expectations for revenue, but “a slight miss” on earnings due to higher operational expenditure.

“The continued strength of the Australia residential business was a key highlight of the result in our view with revenue growth of +24% on pcp to ~$777 million.”

The REA share price has dipped almost 23% so far this year.

Fairmont Equities managing director Michael Gable also picked this ASX share as a buy earlier this week, citing how the share price seems to have passed the bottom.

“Mid-June, everyone was pricing in silly interest rates. What they’re pricing now isn’t so silly,” he said.

“It’s starting to make sense that we should get a bit of a recovery here.”

The post 2 ASX shares that Morgans would buy after excellent results appeared first on The Motley Fool Australia.

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More reading

• 3 rising ASX shares to buy that have passed the bottom: expert
• Top brokers name 3 ASX shares to buy today
• Why A2 Milk, Appen, Boral, and REA shares are dropping today
• What’s going so wrong for ASX 200 tech shares on Wednesday?
• Guess which ASX 200 share just upped its dividend by 25%

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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